What is the company pretax cost of debt

Assignment Help Financial Management

Reference no: EM131346228

Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 9 years to maturity that is quoted at 100 percent of face value. The issue makes semiannual payments and has an embedded cost of 9 percent annually.

Required

What is the company's pretax cost of debt? (Do not round your intermediate calculations.)

If the tax rate is 38 percent, what is the aftertax cost of debt? (Do not round your intermediate calculations.)

Reference no: EM131346228

Questions Cloud

Use of accounts payable financing : Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt–equity ratio of .62. It’s considering building a new $71.7 million manufacturing facility. A new issue of common stock. If the tax r..

What is maximum cost the company would be willing to pay : Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $6.5 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. What is the maximum cost the company wou..

Calculate annual depreciation allowances : A piece of newly purchased industrial equipment costs $968,000 and is classified as seven-year property under MACRS. The MACRS depreciation schedule is shown in Table 10.7. Calculate the annual depreciation allowances and end-of-the-year book values ..

Acid test is more stringent measure of than current ratio : The ratio, sometimes called the "acid test," is a more stringent measure of than the current ratio. Nukin’ Gnats Pest Control is trying to determine its cash flow per share. It has revenue of $50,000, $35,000 of expenses, $4,000 of depreciation and $..

What is the company pretax cost of debt : Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 9 years to maturity that is quoted at 100 percent of face value. The issue makes semiannual payments and has an embedded cost of 9 percent annually.

What is the investment in risk-free asset : You want to create a portfolio equally as risky as the market, and you have $1,400,000 to invest. What is the investment in Stock C? What is the investment in risk-free asset?

Common stock-bonds make semiannual payments : Consider the following information for Evenflow Power Co., Debt: 5,000 5 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 105 percent of par; the bonds make semiannual payments. Common stock: 120,000 shares outsta..

Calculate the standard deviation for stock : Calculate the expected return for Stock A. Calculate the standard deviation for Stock A. Calculate the standard deviation for Stock B.

Cash is expected to be available to retire bonds at maturity : 9% bonds with a face amount of $45 million were issued for $45 million on October 31, 2007. The bonds mature on October 31, 2027. Market conditions are such that the call is not expected to be exercised. Noncallable 8% bonds with a face amount of $17..

User Account

All Pages